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Buying an apartment versus a house

Should you buy an apartment or a house? An apartment may be cheaper and more convenient, but it means less space and more neighbours.

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So you're determined to buy a property but you're stuck on the choice between a unit or a free-standing house. Ultimately, only you can decide what you're looking for. And to work this out, you need to determine your goals and the lifestyle you want to live.

Is it an investment property? Are you trying to maximise your capital return or you are trying to bring in as much rent as possible? If you're buying a home, will an apartment suit your lifestyle needs better than a big house with a backyard to maintain? And your financial position affects your choice as well.

The pros and cons of buying a house

Houses offer more space, more renovation options and more privacy. But you're on the hook for more property maintenance, especially if you have a garden or buy an older property.

Pros

  • Floor space. If you want to conquer the final frontier and get more space for your family to live in comfortably, houses offer far more room to move than apartments.
  • Outdoor space. If you have a green thumb, you want to expand your home or if you have young kids, a backyard is useful. You can build a pergola or entertaining area and enjoy the freedom of having your own outdoor space.
  • Flexibility. If you own a house, you can more or less do what you want – there are no owners’ corporation or strata laws to abide by. As long as you keep council and building regulations in mind, you’re pretty much free to renovate however you like. You can expand or upgrade the house, adding to your equity and making the place more liveable.
  • Privacy. Another benefit of living in a house instead of an apartment is that you’re generally not living in as close proximity to your neighbours. So you can enjoy your life without having to worry about disturbing your neighbours (or being disturbed by them).
  • Greater value. House prices grow faster, on average, than apartments. This means you can build wealth more easily just by owning a house.

Cons

  • Higher prices. Houses are almost always more expensive than comparable units in similar neighbourhoods. This means you either save a bigger deposit and borrow more or buy a house in a cheaper suburb.
  • Maintenance. Lawns need mowing, gutters need cleaning, trees need trimming and windows need washing. A house can be a lot of work. That's fine if you love DIY projects and gardening. If you don't, the extreme low maintenance aspect of apartment living is pretty appealing.
  • Higher costs (and more bills). Living in a house is generally more expensive than living in an apartment. You have more space to heat and cool, and more furniture and equipment to buy.

The pros and cons of buying an apartment

Owning a unit or apartment means less maintenance, but you have the extra cost of strata or body corporate fees. And your neighbours live just one wall, floor or ceiling away.

Pros

  • More affordable. While there are some exceptions to the rule, apartments are generally cheaper to buy than houses. According to figures from Domain Group in September 2021, Sydney’s median house price was $1,499,126. The median apartment price was just $802,475. For Melbourne, the median house price was $1,037,923 and the median unit price was $576,879.
  • Less maintenance. You don’t have to mow the lawn or tend to the garden when you own an apartment. There’s also the fact that there are plenty of maintenance tasks that can be looked after by strata, meaning you have more free time to do whatever you want.
  • Low cost. While the reduced space of apartments can be a drawback, it also results in cheaper electricity and gas bills.
  • Location. Many apartments are built near city centres, allowing you to live closer to everything, from transport and schools to restaurants and even your work.
  • Extra facilities. Owning an apartment might also give you access to a whole host of building facilities. There could be a pool, gym, tennis court, playground and even a shared garden. These added inclusions need to be taken into account when deciding whether to buy an apartment or a house.
  • Security. Thieves often have to pass through several layers of security to get to your apartment door, which isn’t the case with many houses.

Cons

  • Strata/owners’ corporation by-laws. Living in an apartment means abiding by the rules imposed by the owners’ corporation, such as not hanging washing over the balcony or not having pets in the property. If you want to renovate or upgrade your apartment, you may need to seek approval first.
  • Fees. You’ll also need to pay a fee to the owners’ corporation to cover shared maintenance costs, so remember to take this into consideration when calculating total costs.
  • Less space. Apartments don’t offer as much living space as houses.
  • Less privacy. If you don’t like listening to your neighbours fight, entertain guests or get up to anything else in the privacy of their own home – or the fact that they can probably hear you doing the same things – apartment living may not be for you.

Do houses or units make for better investments?

If you're investing in property, the apartment versus house question looks quite different. And it comes down to your strategy and goals.

Rental income

All other things being equal, a house will bring in more rental income than an equivalent apartment. But possibly not as much as the extra purchasing cost, given that houses sell at much higher prices. If you're looking to maximise rental income while minimising expenses, then an apartment might be a better fit. Crunch the numbers and work out which is better for you. But you'll also need to consider capital growth.

Capital growth

Most investors are really focused on making capital gains, which refers to the growth in value of the property. In a rapidly rising market, many properties have doubled in value over 5-10 years. This investment strategy has been a huge wealth creation vehicle for many Australians and has played a large role in fuelling the recent property boom.

The data is clear: houses show much stronger capital growth than apartments. The majority of Aussies prefer houses, and owning land is seen as more valuable than owning a piece of an apartment complex. But this trend is slowly changing as more and more Australians live in apartments.

But rental income is an important factor too. If you are able to buy a unit for much less than a house, but rent it for a similar amount, you might be able to enjoy a slower capital growth on a property that pays for itself more easily.

House vs apartment: Making your decision

Regardless of whether you’re an owner-occupier or an investor, the best way to solve the apartment vs house dilemma is to consider your needs and plan ahead. For example, if you’re thinking of starting a family in a few years, is a tiny inner-city apartment really the best option? On the other side of the coin, if your kids will most likely leave home in the next few years, is a massive 5-bedroom house the best solution?

Once you know what you need in a home or an investment both now and into the future, you’ll be able to decide whether an apartment or a house is right for you.

Buy a house or apartment with one of these home loans

$
years
Name Product Comparison Rate Fees Monthly Payment

Ubank Neat Variable Home Loan
Principal & interestOwner-occupier40% min. deposit
Principal & interestOwner-occupier40% min. deposit
Interest Rate
2.64%
2.65%
  • Application: $0
  • Ongoing: $0 p.a.
$605
Get flexibility and the option to make unlimited extra repayments with this variable rate loan.

Unloan Variable Home Loan
Principal & interestOwner-occupier20% min. deposit Refinancers only
Principal & interestOwner-occupier20% min. deposit Refinancers only
Interest Rate
2.64%
2.56%
  • Application: $0
  • Ongoing: $0 p.a.
$605
A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.

loans.com.au Smart Booster Discount Variable Home Loan
Principal & interestOwner-occupier20% min. deposit
Principal & interestOwner-occupier20% min. deposit
Interest Rate
2.60%
2.96%
  • Application: $0
  • Ongoing: $0 p.a.
$602
Get a low discounted variable rate loan. Requires a 20% deposit. Get your loan processed fast and settle within 30 days.

Nano Variable Home Loans
Principal & interestOwner-occupier20% min. deposit
Principal & interestOwner-occupier20% min. deposit
Interest Rate
2.74%
2.74%
  • Application: $0
  • Ongoing: $0 p.a.
$613
Competitive rate with zero fees, fast approval and a 100% free offset account. Available for refinancers and existing buyers purchasing their next home. 20% deposit required.

Macquarie Bank Basic Home Loan
Principal & interestOwner-occupier40% min. deposit
Principal & interestOwner-occupier40% min. deposit
Interest Rate
2.84%
2.84%
  • Application: $0
  • Ongoing: $0 p.a.
$621
This flexible variable rate loan requires a 40% deposit or equity. Get fast online approval and $0 application fee and $0 ongoing fees.

IMB Budget Home Loan
Principal & interestOwner-occupier20% min. deposit
Principal & interestOwner-occupier20% min. deposit
Interest Rate
2.84%
2.85%
  • Application: $449
  • Ongoing: $0 p.a.
$621
A low-rate, no-frills home loan for borrowers with a good deposit and unrestricted repayments. $0 application fee for eligible borrowers with principal-and-interest repayments and deposits of at least 20%.

Yard Variable Home Loan
Principal & interestOwner-occupier40% min. deposit
Principal & interestOwner-occupier40% min. deposit
Interest Rate
2.64%
2.66%
  • Application: $0
  • Ongoing: $0 p.a.
$605
Get a low variable rate loan with this online lender. 100% offset account. Requires a 40% deposit.

Ubank Neat Variable Home Loan
Principal & interestOwner-occupier20% min. deposit
Principal & interestOwner-occupier20% min. deposit
Interest Rate
2.84%
2.86%
  • Application: $0
  • Ongoing: $0 p.a.
$621
A competitive variable rate loan that comes with a 100% offset account. 20% deposit required.

HSBC Home Value Loan
Principal & interestOwner-occupier30% min. deposit
Principal & interestOwner-occupier30% min. deposit
Interest Rate
2.77%
2.78%
  • Application: $0
  • Ongoing: $0 p.a.
$616
$3,288 refinance cashback offer
This competitive variable rate loan is available for borrowers with 30% deposits. Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
Principal & interestOwner-occupier-10% min. deposit
Principal & interestOwner-occupier-10% min. deposit
Interest Rate
2.79%
2.80%
  • Application: $0
  • Ongoing: $0 p.a.
$617
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, QLD and ACT only.